Joe Biden’s Housing and Urban Development (HUD) has issued a report submitted by its Interagency Task Force on Property Appraisal and Valuation Equity that claims “racial and ethnic bias” in home appraisals for minorities.
Biden announced the task force one year ago on the anniversary of a tragedy that has nothing to do with housing:
On June 1, 2021—the 100th anniversary of the Tulsa Race Massacre—President Biden announced he was launching an interagency initiative to combat bias in home appraisals. This initiative became the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE).
Co-chaired by U.S. Department of Housing and Urban Development Secretary Marcia Fudge and Domestic Policy Advisor Ambassador Susan Rice, the Task Force was directed to (i) evaluate the causes, extent, and consequences of appraisal bias and (ii) establish a transformative set of recommendations to root out racial and ethnic bias in home valuations.
The task force makes the case that racism is embedded in the process of appraising homes for sale in the real estate market. The report says, in part:
A study of appraisal commentary (the free-form narrative section of an appraisal report, reflecting the appraiser’s reasoning for the property valuation opinion) revealed that appraisers sometimes make racial and ethnic references. For example, the study found that one appraiser wrote that a majority-white area was “not especially diverse ethnically,” and another appraiser noted that residents of a “predominantly Hispanic” neighborhood have “assimilated their cultural heritage” into the neighborhood.
A widespread pattern of undervaluation in communities of color can impact an entire neighborhood. Each instance of a lower purchase price becomes a candidate for the next appraiser to choose as a comparable sale for the next appraisal in the community, carrying the impact of the lower value forward.
Over time, even a slight imbalance of undervaluation can have a significant effect on the property values in a community, and hence on the accumulated wealth of homeowners in that community. This effect can hinder families in that community from leveraging equity to pay for college, pay for repairs, or use as a buffer during a financial hardship. Reduced property values can also diminish the property tax revenue that funds the maintenance and improvement of community schools and amenities.
The report names five “task force commitments:”
- Strengthening guardrails against discrimination in all stages of residential valuation.
- Enhancing fair housing/fair lending enforcement and driving accountability in the appraisal industry
- Building a diverse, well-trained and accessible appraiser workforce
- Empowering consumers to take action again bias
- Giving researchers and enforcement agencies better data to study and monitor valuation bias
“I live in an all-black community, my lot and house are bigger, yet my home is valued at $25,000 less than the house two doors down from me which is an all-white community,” Fudge said in the report. “The Biden-Harris Administration acknowledges that communities of color like mine have lost billions of dollars solely through the appraisal process. We’re committed to taking meaningful action to increase homeownership and generational wealth for all.”
The report also links to left-wing media reports on alleged appraisal bias, including the Chicago Sun Times, the San Francisco Chronicle, and ABC in San Francisco.
“As the Task Force transitions into the next phase of its work to advance equity in home appraisals, it will continue seeking opportunities to collaborate with lending institutions, philanthropy groups, academia, civil rights groups, advocates, and industry associations to create a coordinated approach in tackling this issue,” a Fact Sheet on the task force’s work said.
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